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China Is Stealing Our Technology and Intellectual Property. Congress Must Stop It

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As Congress considers a bill to aid our technology competition with China, it must work to ensure that the CCP doesn’t just steal more of our secrets.

The Senate is moving fast to pass the U.S. Innovation and Competition Act (USICA), which will spend significant taxpayer dollars to help Washington compete technologically with China. The bill must include strong “research security” provisions to stop China’s rapacious program of acquiring science and technological know-how. U.S. science and technology programs have not been well protected from Beijing to date, and as Congress pumps more government funding into the U.S. research enterprise, such laxity in protecting American intellectual property (IP) can no longer be tolerated. While other costs to U.S. national power are more difficult to measure, the U.S. Trade Representative estimated in 2018 that Chinese theft of American IP costs U.S. firms between $225 billion and $600 billion every year. General Keith Alexander, a former National Security Agency director, has called China’s technology theft “the greatest transfer of wealth in human history.”

Members of Congress should revisit the full range and scope of the Chinese Communist Party’s foreign-technology-and-science-acquisition programs and address them in the bill. A crucial fact for congressmen to consider is that acquisition of foreign technology is not an incidental or secondary concern of Beijing’s grand strategy; it is a core component of Beijing’s ambition to be the world’s leading power. The CCP believes that erosion of the U.S. technological base is a requirement for its grand designs. Indeed, General Secretary Xi Jinping has made acquiring “key core technologies” one of his foremost goals.

Foreign-Technology-Acquisition Strategies and Programs
While the CCP long ago began acquiring foreign technology to address its own gaps, technology-acquisition programs were given new importance in 2016 when Xi Jinping announced the “Innovation-Driven Development Strategy,” a goal of making China a “science and technology innovation power” by 2050. The IDDS drives foreign-technology acquisition through well-capitalized government investment-“guidance” funds and organizations such as the State Industry Innovational Alliances, which bridge military-industrial groups, academia, and Chinese companies to implement government priorities. Other guiding strategic documents and programs include the Guiding Opinions on Expanding Investment in Strategic Emerging Industries, Made in China 2025, the Internet Plus plan, the Military–Civil Fusion program, and the Artificial Intelligence Plan.

Major lines of effort in Beijing’s foreign acquisition strategy include “talent programs,” exploitation of American universities, hacking and theft, and investment in American firms in order to acquire American technology.

Foreign-Talent Programs
The CCP actively tries to access foreign technology through government-sponsored talent programs. According to Georgetown University’s Center for Security and Emerging Technology (CSET), “talent programs aim to recruit everyone from experts to students of both Chinese and non-Chinese citizenship to fill positions across government, industry, defense, and academia to drive the innovation and growth of the Chinese economy.”

CSET’s China Talent Program Tracker records 27 active national-level talents programs in China, but there are likely even more. The best known is the Thousand Talent Program, which provides scholars in America incentives to provide the CCP with scientific and technological expertise garnered abroad.

Chinese and American scholars who participate in these talent programs have been caught in offenses ranging from deliberately failing to disclose foreign-government funding to downloading and taking sensitive research files back to China. The CSET report “China’s Access to Foreign AI Technology” found that Chinese overseas-technology professional associations are central to China’s attempts to overtake the U.S. in key technologies. The CCP’s United Front Working Groups, organizations meant to co-opt foreign elites to do Beijing’s bidding, play a key role in this effort as well. The Federal Bureau of Investigation and Department of Justice have only recently started to prosecute the most egregious cases of technology collection, such as the talents programs. A sampling of DOJ’s effort to combat illicit tech transfer, the China Initiative, includes:

— A Harvard-affiliated cancer researcher was caught with 21 vials of cells stolen from a laboratory at a Boston hospital.
— A professor conducting sensitive research at the University of Kansas was indicted in August on charges that he concealed his ties to a Chinese university.
— A scholar at UCLA was convicted in June of shipping banned missile technology to his homeland.

CCP Funds for American Universities
Chinese entities are also significant donors to top American universities, and universities are routinely failing to disclose these donations. For example, Hanban, the organization that operates Confucius Institutes, has given $113 million to universities in the United States from January 2012 to June 2018, but the universities themselves reported only $15.5 million of funding. These donations give the CCP an opportunity to influence university activity, especially without proper disclosure and oversight. Not all of this coziness with U.S. universities is meant to acquire technology, but these programs put China in a much better position to do so.

Targeting U.S. Businesses and Government
There are also numerous examples of illicit technology transfer from companies and government agencies. These include:

— Charges against Fujian Jinhua Integrated Circuit, a Chinese state-owned enterprise; United Microelectronics Corporation, a Taiwanese semiconductor company; and three individuals for stealing technology from Micron Technology, an Idaho-based chipmaker
— An indictment against two Chinese nationals for infiltrating an Internet service provider and hacking a major Department of Energy laboratory
— An indictment against two Chinese intelligence officers and five hackers for breaking into the computer systems of 13 aerospace companies

Some government research agencies are slowly beginning to address China’s attempt to target them. The National Institutes of Health and the Federal Bureau of Investigation began an initiative against biomedical-research theft, and the NIH has referred 24 cases of possible criminal activity to the Department of Health and Human Services. Congress should expect that any agency receiving funding in the new bill will be targeted as well.

Military–Civilian Fusion Program
Xi’s MilitaryCivilian Fusion (MCF) program is worthy of special attention. The strategy, according to the strategic-intelligence firm Pointe Bello, is to develop a “national infrastructure that connects the PLA [People’s Liberation Army], state-owned defense research, development and manufacturing enterprises under the State Council, universities, and private sector firms.” The program is meant to mobilize the Chinese and global civilian-technology sector to provide research and development and ultimately new capabilities to the People’s Liberation Army. Of all the technology programs of concern, MCF is most directly involved in acquiring technology to gain an edge over the U.S. military. Examples include joint ventures between CCP-defense industrial groups and civilian makers of unmanned aerial vehicles (UAVs) to improve the PLA’s UAV fleet. The MCF has an almost $5 billion Central Military–Civilian Fusion fund, managed by a defense aerospace company that acquires companies and technologies, and a program to manage high-tech talent, particularly PRC citizens returning from abroad to work in China.

A noteworthy MCF example is that of the Shenzhen-based Kuang-Chi Group, regularly referred to in China as a “military–civil fusion enterprise.” The group was founded by a researcher who had been partly funded by the U.S. Air Force and worked at Duke University. The work was diverted to form a company that now works with the Chinese aerospace industry in joint ventures with U.S. space companies. The Kuang-Chi Group has won contracts to supply the PLA and runs major funds to acquire more technology. This case should be of special interest to Congress, as the bill hopes that National Science Foundation funding will catalyze more academic–industry cooperation in technologies with applications for the U.S. military. There are currently almost no controls on the kind of “military–civil fusion enterprises” that helped form Kuang-Chi.

CCP managers of the MCF program are no doubt carefully tracking where new monies for the National Science Foundation are headed. Chinese researchers and enterprises have a wish list of technological and scientific breakthroughs and have easily exploited the open research enterprise in the U.S. The list of technologies to be funded by the USICA coincides closely with the CCP’s own desired technological advancements.

Chinese Investment in U.S. Technology Enterprises and U.S. Investment in Chinese Technology
There are other non-illicit ways the Chinese government is acquiring American technology, such as Chinese funding of American technology startups through foreign direct investment, venture-capital investments, and joint ventures. The Committee on Foreign Investment in the United States (CFIUS) addresses this issue but is only partially effective in stopping risky investments. The Foreign Investment Risk Review Modernization Act, passed in 2018, seeks to address these weaknesses by mandating certain reviews and allowing CFIUS to review noncontrolling investments. U.S. government officials are very late in enacting further improvements, such as defining “critical technologies” that require review and finally implementing export controls as called for by law.

The CCP’s commitment to technological progress at U.S. expense is at the center of its grand strategy. Legislation to advance the U.S. research enterprise may be necessary to spur investment in areas of scientific and technological research that will not be covered by private enterprise. But Congress can be sure that the CCP is tracking the legislation closely and will set loose its tech thieves on new U.S. programs. The bill must prohibit funding of researchers, universities, and enterprises that are complicit in technology theft. Researchers tied to Chinese talents programs and military–civil fusion enterprises need particular attention from U.S. counterintelligence and other officials. The USICA must be used to finally address the full extent of the CCP’s massive foreign-technology-acquisition programs, enabling the sanctioning of China’s worst IP thieves, expanding intelligence and law-enforcement tools to punish offenders, and strengthening controls against all CCP organizations and businesses operating in the U.S. to steal technology.

Daniel Blumenthal is a director of Asian studies at the American Enterprise Institute and the author of The China Nightmare: The Grand Ambitions of a Decaying State. Linda Zhang is a research associate in Asian studies at AEI.

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